Opinion
- Editorial- Commentary
Sherene
Harryram/
CMMB:
Future
not too bright for Chavez’s Venezuela
What
could possibly be the downfall of an economy basking in some of the world’s
most profitable natural resources? One word. Politics.
Probably,
given this dynamic duo, one of the first things
that come to anyone’s mind is the ever
uncertain Venezuelan economy.
Venezuela’s
leftist president, Hugo Chavez, took office in
1999 promising political and economic reforms
to give the poor a greater share of the sovereign’s
oil wealth. Given his December 3 referendum defeat
in his bid to implement “21st-century socialism” and
govern the country until thy kingdom come, clearly
he has yet to convince 51 per cent of the people
in Venezuela.
For
those who are not familiar with Venezuela’s
politics, here’s a quick snapshot.
The
country has faced a spate of dictatorships from
as far back as the 1870s with tenures lasting
from a mere eight months (ironically, this was
under the first democratically elected president
in 1947: Romulo Gallegos) to a consecutive 27-year
term.
During
this period, the economy faced several coup attempts,
highly volatile oil prices, significant debt
and an ailing banking sector. Despite this, democratically
elected governments have put the Venezuelan economy
on a relatively more stable footing since the
1960s.
Under
the current Chavez administration, following
his initial appointment in 1999, an assembly
was formed to rewrite the country’s constitution.
This propelled the beginning of a new wave of “democracy” in
the economy. Despite massive protests from labour
unions and business organisations against Chavez’s
new policies, lavish social spending programmes
boosted the President’s popularity among
the lower class leading to re-elected terms in
2000 and 2006.
In
early 2007, the government continued on its quest
of becoming a socialist state by nationalising
major energy and telecommunications companies,
closing the main opposition’s television
station whilst putting forward a reform to abolish
presidential term limits to the national assembly.
Pro-Chavez
supporters claimed that the reform would strengthen
a popular revolution and provide Venezuelans
with more rights. On the flip side, opponents
saw the reform as a major step away from democracy
and towards an authoritarian state. Despite this,
on a fundamental front, inflationary pressures
surged, price controls implemented made basic
foods frequently unobtainable while violent crime
became rampant but yet, the popular President
was still expected to emerge victorious.
Following
weeks of public protests and campaigning against
the new constitution put forward by Chavez, the
government’s opposition finally tasted
an unexpected 51 per cent to 49 per cent victory.
The proposed 69 amendments to the constitution
(part of which the President himself inspired)
included abolition of presidential term limits
and the removal of the central bank’s autonomy.
In
reality, this would provide Chavez with new power
to build his socialist revolution and remain
president for life.
Also
included in this package were a few widely supported
changes of a reduced work day to six hours and
offering pension to street vendors and housewives.
This
milestone marked the government’s first
ever defeat since coming into power in 1999 and
has now left the people of Venezuela and the
rest of the world wondering what’s in store
for the sovereign termed by many as “Chavez’s
Venezuela.”
So
what exactly does this defeat mean?
For
pro-Chavez supporters, no substantial change
as their favoured President clearly stated: “I
will not withdraw even one comma of this proposal,
this proposal is still alive. For me, this is
not defeat.”
For
the opposition: “He’s now on the
downside of the curve. For the first time it
is possible to envisage life after Chavez.”
Legally,
Chavez is unable to stand again for the presidency.
His term ends in early 2013, and his defeat has
put a damper on his countless reform proposals
including efforts to form a regional block of
allies and states. For now, he still controls
virtually all the country’s institutions
and has an excessive amount of oil wealth at
his disposal for the next nine months.
Global
investors can certainly attest to Venezuela’s
risk being directly linked to the volatility
surrounding the sovereign’s politics.
With
this recent development, there is no surety that
the economy’s uncertain outlook would diminish
but it certainly bodes well for the economy in
the long term. The results clearly signal that
something fundamental has changed in the sovereign.
The
President no longer commands the majority of
voters as a new revitalised opposition—inclusive
of prior Chavez supporters who have lost confidence
in their leader—are committed to democracy.
Venezuela is still far from reaching its once
stable outlook but overall, this is good news
for the development of the country and the wider
Latin American region.
Anyone
beg to differ?
Note:
All
information contained in this article has been
obtained from sources that CMMB believes to be
accurate and reliable.
All
opinions and estimates constitute the author’s
judgment as of the date of the article; however
neither its accuracy and completeness nor the
opinions based thereon are guaranteed. As such,
no warranty, express or implied, as to the accuracy,
timeliness or completeness of this article is
given or made by CMMB in any form whatsoever.
CMMB
and/or it employees or directors may, where applicable,
make markets and effect transactions, or have
positions in securities or companies mentioned
herein.
Neither
the information nor any opinion expressed shall
be construed to be, or constitute an offer or
a solicitation to buy or sell.
Sherene
Harryram is
a research analyst of CMMB. Petroleumworld not
necessarily share these views.
Editor's
Note: This article was first publish
in The Trinidad Guardian,Thursday 20th December,
2007. Petroleumworld reprint this article in the
interest
of our readers.
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Petroleumworld
12/ 23 /07
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